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Chargers Left With a Decision to Make in San Diego

San Diego Chargers

Less than a week remains on their option to move to Los Angeles, and the San Diego Chargers and the NFL are still determining whether the team is better off leaving or staying put. 

The Chargers’ option to move to Los Angeles, which would allow them to join the Los Angeles Rams at a new stadium in Inglewood when it opens in 2019, is valid through January 15. Following the rejection of their proposed stadium/convention center proposal by San Diego voters in November, the Chargers have publicly stated that they are keeping their options open, and stuck to their plan to not announce a decision before the regular season concluded.

As was discussed last week, the team could remain in San Diego and work in partnership with the city, county, and San Diego State University on a stadium plan. However, with those three entities reportedly contributing a combined total of $375 million, the Chargers could still be left with a funding gap. Even at that, pulling together the stadium could take years, as it would most likely require voter approval and the earliest possible date for a referendum is 2018.

With that, the Chargers would have to wait out the process at Qualcomm Stadium, where their lease expires in 2020. In an in-depth piece for the San Diego Union-Tribune, Dan McSwain took a look at how things could shape up if the team stays at Qualcomm Stadium with its current agreement:

For starters, the team pays negative rent for the city-owned Qualcomm Stadium. From 2006 to 2015, San Diego paid the Chargers $3.2 million for the privilege of playing there, as $25.9 million in rent credits offset $22.7 million in rent.

Meanwhile, the team’s revenue surged 13 percent from 2014 to $344 million in 2015, Forbes estimates, on the strength of national broadcasting and licensing payments that are split evenly among all 32 NFL teams. Not incidentally, the Chargers’ operating income fell 9 percent, to still-healthy $59 million that was certainly reduced by spending on the failed quest for a stadium in Carson.

Now consider that the Spanos family paid $70 million to buy the team in 1984. For the owners, keeping the Chargers at ancient Qualcomm preserves an 84 percent annual return on that initial investment — not counting an estimated 2,800 percent increase in the team’s market value. Striking oil in the backyard could hardly do better, financially.

That’s not to say staying put comes without business risk. Setting aside a lost opportunity in L.A., the big one is that lucrative San Diego lease expires in 2020.

So Spanos must weigh whether he thinks the city might soon jack up his rent or even evict his team. I’d put this in the unlikely column.

There are a number of factors that would have to come into play for the Chargers to remain in San Diego, one of which could be the fate of the option. As originally drafted, that option will be granted to Oakland Raiders next week if the Chargers decide to stay and sort through possibilities in San Diego. However, the Raiders continue to pursue a new stadium in Las Vegas, and that plan looks to be gaining more traction within the NFL than the proposal floated to keep the team in Oakland.

If the move to Las Vegas is approved sooner rather than later, the NFL could decide whether Los Angeles can remain an option for the Chargers in the future if a plan cannot come to fruition in San Diego.

Image courtesy San Diego Chargers. 

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